Russia has reduced gas flows through the NordStream1 pipeline

Here is the latest update on what is happening with the energy market at the moment. Russia has reduced gas flows through the NordStream1 pipeline by a further 20% of capacity, with another turbine being shut down for repairs. This has increased fears that Russia could cut gas supplies completely, and even if flows aren't halted but remain at current low levels, Europe will likely struggle to fill gas storage ahead of the winter. Flows returned from planned maintenance at 40%, the level they were at since a turbine was sent for repair in Canada, which already provided strong upward pressure to UK and European energy markets. However, documentation for the return of the first turbine has been recently given to Gazprom, which could see that turbine returned and flows increased through the pipeline. Overall, the gas supply picture for Europe is beginning to look more bleak.

With this in mind the, the EU has reached an agreement on a weakened emergency gas plan, which whilst initially non-binding could be made binding in the event of a gas supply emergency. The agreement notably exempted certain countries and industries; countries which aren't tied to the EU gas network like Ireland and industries considered critical like Italy. Countries which meet the EU target for filling gas storage by August, rather than the deadline of October, may also see weaker gas demand reduction targets. This could soften the cuts for countries including Germany and Italy. Overall, the impact of the policy is likely to provide upward pressure, however the weakened targets are likely to offset some of the potential for downside. In addition, with Russian gas flows significantly reduced, the cuts may not be strong enough.

Our advice is that anyone with contracts up for renewal in October or for this year, should contact us immediately so we can look at all options and plan the right strategy for your organisation. Do not leave this to the last minute as it will limit the options available. We have multiple suppliers offering a variety of products to help manage the risk of high prices and a volatile market. If anyone has any concerns or just wants some advice, please don’t hesitate to contact us.

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